Verizon challenges FCC's new Internet rules

WASHINGTON/NEW YORK (Reuters) - Verizon Communications took the Federal Communications Commission to court on Thursday over its new Internet traffic rules, arguing the regulator had overstepped its authority.

<p>Verizon president and COO Lowell McAdam (L) talks on stage with Verizon CEO Ivan Seidenberg (R) and Consumer Electronics Association President Gary Shapiro (C) after the Verizon keynote address on the opening day of the Consumer Electronics Show (CES) in Las Vegas January 6, 2011. REUTERS/Rick Wilking</p>

The filing with the U.S. Court of Appeals for the District of Columbia fulfilled the predictions of many industry analysts that the FCC’s split vote last month to impose the rules would be swiftly challenged.

Medley Global Advisors analyst Jeffrey Silva said there was a “reasonable chance” the court would strike down the rules that prevent network operators from blocking lawful content but still let them ration access to their networks.

At stake is ensuring consumer access to content such as huge movie files while letting Internet providers manage their networks to prevent congestion.

The same court ruled last year that the FCC lacked the authority to stop Comcast Corp from blocking bandwidth-hogging applications on its broadband network, spurring the agency’s most recent rulemaking effort.

“They’ve a history of backing the Bells,” said Stifel Nicolaus analyst Rebecca Arbogast, referring to the court’s tendency to side with large communications companies over the

FCC.

Verizon said it was concerned by the FCC’s assertion of broad authority to make new regulations on broadband Internet networks.

“We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers,” Verizon deputy general counsel Michael Glover said in a statement.

A senior FCC official said Verizon appeared to be premature in making its filing since the rules have not even been published yet in the Federal Register.

The agency is confident its order is legally sound, added the FCC official, who spoke on condition he was not named.

In its 3-2 vote on December 21, the FCC gave wireless service providers more leeway in managing their networks but still forbade them from blocking access to websites or competing voice and video applications.

The action highlighted a huge divide between those who say the Internet should flourish without regulation and those who say the power of high-speed Internet providers to discriminate against competitors needs to be restrained.

Even though the FCC’s Internet rules have not been formally published yet, a step that would put them into effect, Verizon’s appeal argued that the rules would modify wireless airwave licenses it holds.

Verizon is majority owner of Verizon Wireless, the biggest U.S. mobile service.

Arbogast said other companies or public interest groups who support the Internet rules might file a challenge in another court in a bid to shift to a venue more sympathetic to the FCC. She predicted it would take 18 months to resolve the issue in the courts.

Free Press, a public interest group that had argued for even tougher rules, said Verizon was unhappy even with the watered down measure that was meant to appease it.

“It’s now clear that it will settle for nothing less than total deregulation and a toothless FCC,” said Aparna Sridhar, policy counsel for Free Press.

Reporting by Sinead Carew in New York and Jasmin Melvin in Washington D.C.; Editing by Tim Dobbyn